Wells Fargo Sees Retail Banking Growth Hurt by Scandal, WSJ Saysby
Wells Fargo & Co.’s top executives expect growth in its retail business to be “down for a while” as a result of the bank’s cross-selling scandal, while efforts by states to punish the lender are having little effect, the Wall Street Journal reported.
Chief Executive Officer John Stumpf and Chief Operating Officer Timothy Sloan, speaking Monday on a call with 500 of the bank’s senior managers, said they anticipate things getting worse for the San Francisco-based firm before they get better, according to the newspaper, which reviewed a recording of the call. Wells Fargo is scheduled to report third-quarter results on Friday.
Wells Fargo has been embroiled in a scandal involving the creation of as many as 2 million unauthorized accounts, and last month said it will pay $185 million to government agencies to settle the claims. Stumpf, who agreed to forgo $41 million in pay following a grilling by a Senate committee over the matter, said he visited numerous branches last week and “clearly this has not helped,” the Journal reported.
New business at the retail bank “will be down for a while,” Stumpf said on the call. “There’s just no question about it.”
Sloan told the executives that more accounts were being opened than closed, though growth in checking accounts has slowed, according to the newspaper. He said that referrals to units within the consumer lending groups have also declined and that he’d heard stories of lost business with small or midsize companies, the Journal said.
Oscar Suris, a bank spokesman, declined to comment on the Journal’s story.
The states of California and Illinois have suspended Wells Fargo from handling billions of dollars of investments and the underwriting of state debt. Other than some additional third-quarter legal set-asides, the states’ actions haven’t had that much effect yet, Chief Financial Officer John Shrewsberry told the executives, according to the Journal.
“We probably won’t broadcast that because it might incentivize people to do more, to make it tougher on Wells Fargo, but the story line is worse than the economics at this point,” the newspaper quoted Shrewsberry as saying on the call.
Wells Fargo slid 3 cents to $45.62 at 10:44 a.m. in New York. The stock has tumbled 16 percent this year, the worst performance in the 24-company KBW Bank Index, which has declined less than 1 percent.